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Newsletter 85 - January 2026
This edition explores Asia’s latest industrial and technological shifts, from heavy equipment consolidation and humanoid robotics to the rise of Physical AI and next-generation connectivity. It covers landmark regulatory moves in artificial intelligence, breakthroughs in real-time holographic communications, strategic pivots in media and consumer electronics, and major transitions in battery manufacturing beyond lithium, highlighting how automation, embodied AI, advanced networks, and content ecosystems are redefining the region’s industrial powerhouses.
📉 Economic Outlook: Contrasts Across East Asia Markets
South Korea caught attention this month with the announcement of unexpectedly weak growth in the fourth quarter of 2025. In fact, the economy even slipped into contraction, marking its sharpest downturn in years. And yet, pessimism remains limited. The country’s outlook continues to be buoyed by the strength of its industrial champions in semiconductors, with SK Hynix and Samsung Electronics firmly positioning themselves at the heart of global demand for AI-related technologies. Japan, meanwhile, made headlines abroad for very different reasons.
The sudden drop in prices of long-term government bonds (30- and 40-year maturities), and the corresponding spike in yields at the end of the month triggered alarmist commentaries in several foreign economic outlets. Some framed the episode as a sign of a broader loss of confidence in the country’s long-term prospects. Others voiced concern that higher domestic yields could encourage Japanese investors to repatriate part of the vast capital invested overseas. Inside Japan, the episode barely registered.
When it did, it was largely interpreted as a technical market reaction to the Prime Minister’s announcement of a possible suspension of VAT on some goods, in the context of a snap election call.As for the Davos economic meeting, it has generated no shortage of commentaries this month. We will not dwell on it here. It is nonetheless worth noting that, while covered in East Asian media, be it China, Japan, or South Korea, it was sometimes portrayed less as a global moment than as a distant chronicle of Western political and economic theatrics.Against this backdrop of contrasting signals and interpretations, one country increasingly stands out in the regional narrative. China is coming to be seen as a tough yet predictable and comparatively stable economic partner.
🏗️ Construction: HD Construction Equipment Debuts After HD Hyundai Merger
HD Hyundai has officially launched HD Construction Equipment, created through the merger of HD Hyundai Construction Equipment and HD Hyundai Infracore. The launch ceremony was held on Jan. 1 at HD Hyundai’s Ulsan campus, attended by Chairman Chung Ki-sun, Vice Chairman Cho Young-chul, President/CEO Moon Jae-young, and around 200 executives and employees.
By combining Korea’s top two construction equipment companies, the new entity becomes the country’s largest construction equipment manufacturer, with ~8 trillion won in annual sales and production bases in Ulsan, Incheon, Gunsan, plus overseas operations in India, China, Brazil, and Norway. The company plans to pursue growth across construction equipment, engines, and aftermarket (AM) while strengthening two brands, HYUNDAI and DEVELON, through integration synergies.For 2026,
HD Construction Equipment targets 8.7 trillion won ($5.9B) in revenue and 439.6 billion won in operating profit, while maintaining a longer-term ambition of 14.8 trillion won in sales by 2030. The strategy centers on re-optimizing global production for both brands, leveraging economies of scale in purchasing and logistics, and accelerating next-generation new models, already introduced in Korea and Europe, into North America in the first half of this year.
The company is also pointing to emerging-market traction: contracts in Ethiopia to supply 70 DEVELON 36-ton excavators plus 50 HYUNDAI 34-ton excavators, where HD Hyundai’s excavator share reached 80% last year. Additional wins include a Vietnam government order for 71 machines (including 20 20-ton wheeled excavators for disaster response) and 41 units in Kyrgyzstan (including 52-ton and 38-ton excavators) for road and building projects.
🤖 Robots: Hyundai’s Humanoid Bet: Atlas Steps Out of The Lab
The standout humanoid at CES 2026 was Atlas, developed by Boston Dynamics (majority-owned by Hyundai Motor Group, described as ~90% owned). Hyundai framed Atlas as the “core model” of its AI robotics strategy built not as a concept piece, but as a general-purpose robot meant to fit into existing manufacturing environments.
What Atlas can do (and why it’s different now?
The newly revealed fully electric Atlas development model is lighter, easier to maintain, and more energy-efficient than the earlier hydraulic version. It pairs 360-degree vision with human-sized hands equipped with tactile sensors and a 56-DoF joint structure with fully rotating joints supporting natural, human-like movement. In practical terms: it can lift up to 50 kg, operate from 20°C to 40°C, and is water-resistant and washable.
When power runs low, it autonomously navigates to a charger, swaps batteries, and resumes work and Hyundai says it can learn most tasks within a day.
From stage performance to phased deployment
Hyundai’s commercialization play starts at the factory. The group plans a Robot Metaplant Application Center (RMAC) in the U.S. to define tasks and train Atlas via remote operation, simulation, and repeated training before production deployment.
The first major landing zone is Hyundai Motor Group Metaplant America (HMGMA) in Savannah, Georgia with a roadmap that begins with parts sorting processes in 2028, expands into parts assembly by 2030, and scales across global sites after performance verification. Hyundai also highlighted a broader ecosystem approach, bringing in group affiliates (manufacturing data, actuators, logistics optimization) and expanding partnerships with global AI leaders including Nvidia (strategic partnership since 2025) and Google DeepMind, while even considering a subscription-based robot model to scale adoption.
At the same CES, LG Electronics unveiled LG CLOiD, a next-generation AI home robot positioned as an “in-home secretary” that prioritizes tasks based on schedules and the home environment, runs chores, and coordinates appliances. LG says its chipset integrates proprietary vision-language (VLM) and vision-language-action (VLA) technologies trained on tens of thousands of hours of household task data, signaling that Korea’s robot race is expanding from factories to living rooms.
LG ClOiD Home Robot
🧠AI Regulation: South Korea’s AI Basic Act Takes Effect: A Global First
South Korea has formally implemented the AI Basic Act as of 22 January 2026, establishing what authorities describe as the world’s first comprehensive legal framework to govern artificial intelligence, ahead of other major jurisdictions such as the European Union, whose own AI Act is being phased in through 2027.
South Korea’s National Assembly chamber in Seoul. The AI Basic Act, the country’s first comprehensive AI regulatory framework, was passed here before entering into force in January 2026.
Promoted by the Ministry of Science and ICT as a balance between innovation and safety, the Act introduces baseline safety and transparency obligations for AI systems, especially those categorized as “high-impact”, defined as technologies with significant potential to affect public safety, human rights, or essential services such as healthcare, transport, and critical infrastructure. Companies deploying such systems are required to ensure meaningful human oversight and to implement risk management strategies.
Under the law, generative AI outputs that may be hard to distinguish from reality must be clearly labeled or watermarked, and users must be notified when interacting with AI systems. Enforcement includes a grace period of at least one year before penalties, which can reach up to approximately 30 million won (around US$20,400), are imposed, reflecting a compliance-oriented approach.
The Act also signals a shift from voluntary principles to enforceable obligations for AI developers and service providers, including multinational companies meeting certain revenue or usage thresholds, which may be required to designate local representatives for compliance purposes.
Promulgated in December 2024 and scheduled to take effect in January 2026, the AI Basic Act was drafted after extensive consultations with industry and expert stakeholders and is designed to foster both public trust and industrial competitiveness in the rapidly evolving AI space.
While the law aims to support AI growth, including national plans for R&D, infrastructure, and talent development, industry voices have raised concerns about vague provisions and potential compliance burdens for startups and SMEs, particularly where definitions such as “high-impact AI” remain subject to detailed enforcement decrees.
The introduction of the AI Basic Act places South Korea alongside, and in some respects ahead of, global peers in operational AI regulation, seeking to set baselines for transparency, accountability and safety while still enabling innovation and economic development.
🔋Battery: Beyond Lithium: CATL and LGES Pivot to Sodium-Ion Production
CATL is fast-tracking the sodium-ion era, with plans to integrate these batteries into passenger vehicles as early as the second quarter of 2026. The debut model, produced by GAC Aion, marks a significant leap from industrial applications to the mainstream automotive market. This rollout is supported by CATL’s Naxtra brand, which has achieved an energy density of 175 Wh/kg, effectively rivaling traditional lithium iron phosphate (LFP) batteries. Beyond passenger cars, the company is scaling this technology for commercial use through its Tectrans II series, featuring 45-kWh packs that maintain 90% capacity even at extreme temperatures of -40°C. By overcoming traditional thermal and energy density hurdles—evidenced by a 5C charging rate that keeps temperature rises under 5°C—CATL aims to make sodium-ion a staple for everything from energy storage to construction machinery within the next three years.
Simultaneously, South Korea’s LG Energy Solution is cementing its presence in the sodium-ion sector by establishing a pilot production line at its Nanjing facility in China. This strategic move leverages China’s robust supply chain for cathode materials to validate mass-production feasibility in a region that already leads the market. The development process follows a rigorous path from R&D and initial prototypes in South Korea to the production of mass-ready "Sample C" units at the Nanjing plant. As the world’s third-largest battery maker with a 9.3% market share, LGES is navigating the volatile lithium market by diversifying its portfolio alongside local Chinese rivals like Hina Battery and Zoolnasm. While the company remains cautious about finalizing a full-scale deployment timeline, the completion of this pilot line within the year signals an aggressive push to commercialize next-generation batteries that could finally break the industry's lithium dependency.
🚗 Mobility: Hyundai Rotem Reshuffles for the Physical AI Era
Hyundai Rotem is pivoting to secure leadership in new growth businesses centered on robotics and hydrogen, as global industrial competition rapidly shifts toward physical AI, AI that goes beyond digital outputs to perceive, judge, and act in real-world spaces via hardware such as sensors and robots. The company said it has carried out an organizational overhaul to strengthen new businesses and prepare for this transition.
In his New Year’s address, CEO Lee Yong-bae highlighted intensifying competition in future industries including hydrogen, unmanned systems, AI, and aerospace, stressing the importance of technological sovereignty and speed in translating it into commercial applications. Hyundai Rotem plans to expand core technologies tied to autonomous driving and physical AI across its business models.
By business segment, the defense operation will develop manned–unmanned integrated ground weapon systems and nurture an aerospace portfolio. The company plans to equip next-generation tanks, armored vehicles, and its multipurpose unmanned vehicle HR-Sherpa with AI-based autonomous driving and swarm control capabilities, while expanding R&D of multi-legged walking robots. In aerospace, Hyundai Rotem has begun developing a 35-ton-class methane engine aimed at an era of privately led space transportation.
Hyundai Rotem’s multipurpose unmanned vehicle the HR-Sherpa
The rail business will advance an AI-based condition-based maintenance system, while the plant segment will expand R&D and commercialization of smart logistics solutions, including automated guided vehicles for ports, strengthening capabilities linked to robots and hydrogen.
Hyundai Rotem official inspecting a railway vehicle using a condition-based maintenance system
To execute faster, Hyundai Rotem established a Robot & Hydrogen Business Office, created dedicated robot sales and research teams, reorganized growth/hydrogen teams into robot & hydrogen planning and project management units, renamed its manned–unmanned systems center and robotics team into the AX (AI transformation) Promotion Center and AI Robot Team, and added an aerospace systems team under the Aerospace Development Center. The reorganization also shifts the company from a function-based structure to a business-oriented system, reducing units from 37 divisions / 15 centers / 186 teams to 35 divisions / 14 centers / 176 teams, effective this month, to remove overlap and improve efficiency.